[Editorial] Preemptive Action Needed to Avoid Crisis

Though groundlessly inflated “black September” rumors turned out wrong, the fundamentals of the Korean economy remain unstable. The worsening of the global economy is likely to negatively affect export-dependent Korea. Despite falling crude oil prices, domestic demand and corporate investment show no signs of improving and continued inflation is making the Korean people feel cornered.

Against this backdrop, the government should minimize the effects of the Wall Street shock. Over the Chuseok holidays, the U.S. financial market panicked as Lehman Brothers, the fourth-largest U.S. investment bank, filed for bankruptcy and Bank of America agreed to buy the troubled Merrill Lynch. Asian stock markets including Taiwan’s tumbled on worries over the economic slump. The Korean stock market remained stable over the weekend but is also expected to see negative effects from these changes.

More Koreans are finding it hard to meet their daily needs. Last month, consumer inflation reached 5.6 percent year-on-year, while the average household debt was 40 million won (36,000 U.S. dollars), a three-fold increase from a decade ago. Small and medium-size firms are in pain and a slew of construction companies with a glut of unsold apartments are teetering on the brink of collapse. The number of new jobs fell short of expectations, with a rise of just 160,000 to 180,000 from a year ago. Economic activity by those in their 20s fell to 63.2 percent, the lowest in a decade. The number of unemployed youth in their 20s was a startling 2.42 million.

The government has shown its lack of prompt response as seen in the resumption of U.S. beef imports. It should remember that old tactics to control prices and deregulate cannot win the hearts and minds of the people. The only way to overcome the country’s economic challenges is to preemptively respond to hidden factors that pose a threat to the financial and real economic sectors.

Many were disappointed over the government’s inflation control over the Chuseok holidays, but expressed hope for economic revival. The Lee administration should take the responsibility for economic management down the road. Pointing its finger at external factors or the former Roh administration can no longer avoid growing public criticism. To restore public confidence and build momentum for public sector reform, the government should inform the people of the exact economic situation and put forth an all-out response.